Supply Chain Organization Structure

The supply chain management world has seen huge advancements in artificial intelligence and IoT of things in recent years, writes IoTforAll.com. Companies and organizations now have the capabilities to access, store, and process incredible amounts of data to incorporate into better decision-making across the supply chain.

From food and beverage distribution to high tech, companies are analyzing data sets, identifying key insights and incorporating analytics to apply to their supply chain operations. These organizations are then able to use this data to integrate into their supply chain organization structure, according to Supply Chain Digest. It's become obvious that big data has become super important across many businesses and industries.

Basic Supply Chain Structure

Companies that buy and sell supplies from each other form a basic supply chain. In doing so, the lead company forms a series of relationships with each company, and manages the process of issuing and processing purchase orders on demand. A supply chain structure definition includes the suppliers of raw materials, components and services that a company needs to manufacture and distribute its products to intermediate or final customers.

Supply chains can use different organization structures that reflect the business relationship or degree of collaboration between companies in the chain. These structures may be as light as informal relationships, in which companies make occasional purchases from a diverse group of suppliers. Or they extend to rock-solid partnerships in joint ventures or integrated supply chains where there is a high degree of collaboration and dependency.

Lead companies have access to suppliers, they may face problems caused by fluctuations in supply capacity, delivery reliability or quality.

Supply Chain Member Collaboration

To improve the company members' efficiency, members can agree to increase supply chain collaboration. This does not change the organization structure of companies buying and selling to each other, but it creates more formal relationships.

Members agree to share production and demand data over a secure network so that each company can plan its operations more efficiently and minimize the risk of supply fluctuations. Members may also decide to harmonize their quality standards to ensure consistency and minimize waste throughout the supply chain.

Supply Chain Partnerships

As collaboration increases, a supply chain team structure starts to form among members. This structure is grouped around long-term partnerships to stabilize supply arrangements. They replace ad hoc purchase orders with long-term supply contracts and may collaborate on cost-reduction programs. Long-term contracts ensure continuity of supply for the lead company and provide greater stability for other members of the supply chain.

Levels of Partnership Collaboration

Companies that depend on certain members of the supply chain for essential supplies, such as critical components or scarce raw materials, often set up tiered supply chains. Tier 1 suppliers, for example, supply the most important products or services. Companies in lower tiers operate as sub-contractors to tier 1 companies. The relationship between tier 1 suppliers and the lead company are close, with stringent quality and contractual arrangements in place.

Supply Chain Integration

If your organization supply chain goal is to become more efficient and maximize revenue, the you want to work via an integrated supply chain. When a company institutes supply chain integration, notes Thomas.net, the lead company takes formal control of its most important suppliers through mergers or acquisitions. Integration can create a barrier to entry for competitors and reduce costs if suppliers operate efficiently. However, it can also reduce the lead company’s flexibility to switch suppliers if problems occur.

Supply Chain Digitization

The immense growth of supply chain digitization will continue to play a big part for company supply chains, according to River Logic.com. Using IT and big data structures will help to eventually eliminate manual processes. In addition, increasing digitization will help to foster new initiatives for the use of paperless processes for developing how to understand and fully utilize all the tools in an organization's supply chain